Correlation Between Global X and Sprott Junior

Can any of the company-specific risk be diversified away by investing in both Global X and Sprott Junior at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Global X and Sprott Junior into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Global X Silver and Sprott Junior Gold, you can compare the effects of market volatilities on Global X and Sprott Junior and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Global X with a short position of Sprott Junior. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global X and Sprott Junior.

Diversification Opportunities for Global X and Sprott Junior

0.6

Correlation Coefficient

Global X  Sprott Junior

Poor diversification

The 3 months correlation between Global and Sprott is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Global X Silver and Sprott Junior Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprott Junior Gold and Global X is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Global X Silver are associated (or correlated) with Sprott Junior. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sprott Junior Gold has no effect on the direction of Global X i.e., Global X and Sprott Junior go up and down completely randomly.

Pair Corralation between Global X and Sprott Junior

Considering the 90-day investment horizon Global X is expected to generate 1.14 times less return on investment than Sprott Junior. But when comparing it to its historical volatility, Global X Silver is 1.01 times less risky than Sprott Junior. It trades about 0.19 of its potential returns per unit of risk. Sprott Junior Gold is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  3,295  in Sprott Junior Gold on December 28, 2024 and sell it today you would earn a total of  961.00  from holding Sprott Junior Gold or generate 29.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Global X Silver  vs.  Sprott Junior Gold

Global X Silver

Risk-Adjusted Performance

Good

Over the last 90 days Global X Silver has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite weak forward indicators, Global X disclosed solid returns over the last few months and may actually be approaching a breakup point.

Sprott Junior Gold

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sprott Junior Gold are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating fundamental indicators, Sprott Junior revealed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Global X and Sprott Junior

The main advantage of trading using opposite Global X and Sprott Junior positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global X position performs unexpectedly, Sprott Junior can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Sprott Junior will offset losses from the drop in Sprott Junior's long position.

The idea behind Global X Silver and Sprott Junior Gold pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.